Federal Reserve Chairman Ben Bernanke is unlikely to announce a major change in monetary policy later today at his second-ever news conference, however investors will look for change in his language on whether the Fed will scale back its liquidity operations in financial markets.
The central bank will release quarterly economic forecasts and analysts expect them to be revised lower to reflect the recent weakness, but they said Bernanke will be quick to say he sees an acceleration in the recovery.
The Federal Open Market Committee is likely to take the formal decision to end the second round of quantitative easing – a program under which it pumps liquidity in markets by buying assets – at the end of June but to leave the reinvestment policy in place.
According to a report issued by Barklays capital they stated "This could be accomplished by changing the language in the statement from 'will purchase' to 'will complete' its purchases of $600 billion in Treasury securities and 'will maintain its existing policy of reinvesting principal payments from its securities holdings.
The Fed's statement is due at 12:30 pm New York time and Bernanke's news conference is expected to start at 2:15 pm.
The consumer price index for all items excluding volatile food and energy increased 0.3 percent in May, its largest increase since July 2008, while overall inflation was 0.2 percent month-on-month.
The statement is likely to say that headline inflation was pushed higher by a rise in commodity prices but that these have fallen back somewhat and inflation expectations remain stable, Barclays Capital analysts wrote.
"Several FOMC members have made comments in support of a formal inflation target. We expect the committee to discuss this topic in depth during its June meeting and would not be surprised to hear the chairman characterize the committee's views on the adoption of an explicit inflation target," they added.